newsCO.com.au –Transurban earnings soar, while IOOF profit drops, as profit reporting season rolls on

August 8, 2017

Posted

August 08, 2017 12:29:37

Australia’s biggest toll road operator Transurban has reported an almost 10-fold increase in full year profit, but it still has left investors feeling short changed.

Key points:

  • Transurban toll revenues up 10.6pc on 4 higher traffic volumes
  • Shares sold off aggressively despite 850pc increas in net profit
  • IOOF shares bounce despite profit slump as cost cutting impresses

Transurban’s net profit was up 850 per cent to $209 million, from $22 million the year before.

While total revenue rose by 24 per cent to $2.7 billion, the major difference was the 2017 result was not weighed down by significant items, such as last year’s integration cost of the Brisbane’s Airportlink tollway and a large stamp duty bill.

Underlying profit — excluding one-off items — rose 34 per cent to $239 million, short of the consensus estimate of $288 million.

The company also forecast a full-year dividend for 2018 of 56 cents per share, which was slightly below expectations but up from this year’s 51.5 cents.

Overall proportionate toll revenues — the company’s preferred figure — rose 10.6 per cent on the back a 4 per cent increase in traffic volumes.

Transurban’s biggest network around Sydney delivered a 9.2 per cent increase in revenue with 3.4 per cent more traffic, while Melbourne’s toll takings were up 4.1 per cent, despite a 1 per cent decline in volume.

Brisbane revenue was up almost 23 per cent as the benefits of the Airportlink integration gained traction, while the company’s US operations around Washington also grew solidly.

All up, the results indicate that Transurban was mainly profiting from an increase in tolls rather than by a rise in the number of motorists using its roads.

At midday (AEST) Transurban shares had tumbled 3.1 per cent to $11.57.

‘Don’t touch the expensive North East Link option’

The company said it expected to sign off on a contract for Melbourne’s $5.5 billion West Gate Tunnel project later this year and has an eye on a joint-venture deal for the $16.8 billion WestConnex project in Sydney as its other key growth project.

Transurban chief executive Scott Chisholm also offered some advice to the Victorian Government over the just announced options for the North East Link project – “don’t go with the expensive one”.

“I wouldn’t touch the $23 billion one,” Mr Chisholm told an analyst conference call.

Mr Chisholm said governments had learnt to consult with communities and not just “impose tough love decisions.”

“I applaud them [The Victorian Government] for putting out options, but I would have thought $23 billion is a lot of money. I would have thought it would be one of the other options.”

IOOF surges despite profit fall

Wealth manager IOOF — the one-time Independent Order of Oddfellows — went the other direction to Transurban with its share price taking off despite a 41 per cent fall in profit.

Net profit fell to $116 million from almost $200 million last year.

However investors were pleasantly surprised by underlying earnings being well ahead of expectations, down just 1 per cent to $169 million.

Importantly, funds under management rose by 156 per cent to $4.6 billion as the company expanded its advisor base.

The company also came in at the top of expectations with a full-year dividend of 53 cents.

Citi’s Nigel Pittaway said invertors should appreciate the cost cutting program which has taken some pressure off margins.

“We think the market will like this result, despite the beat being driven by cost rather than revenue, as IOOF shows it can protect the bottom line from continued margin compression,” Mr Pittaway wrote in a note to clients.

IOOF shares were up 5.7 per cent to $10.67 at midday (AEST).

Topics:

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